The increase was below the 1 percent rise recorded in February. Some market watchers worry that the increase is just a quirk of the mild winter, not necessarily a sign of recovery. The sales could just be a result of lawn mowers, spring dresses and other warm-weather goods being sold earlier in the year, which could mean sales might peter out in the coming months.

Mattel plummeted more than 8 percent after reporting a 53 percent drop in first-quarter earnings. The country's largest toy maker is wrestling with lower sales of Hot Wheels and Barbies, and is also still digesting its recent purchase of HIT Entertainment, the company behind Thomas the Tank Engine and Bob the Builder.

Banks were among the biggest gainers in the S&P 500, though the increase followed sharp losses on Friday. Citigroup rose more than 2 percent after reporting earnings. The bank missed analysts' income forecasts but also said more customers are repaying their loans on time. Investors had sent bank stocks sharply lower Friday even though JPMorgan Chase and Wells Fargo beat earnings estimates on concerns about lawsuits against banks and a plodding economy that isn't generating that much demand for loans.

There were also signs of more trouble in Europe. Spain's borrowing costs climbed, which means investors are worried about the country's ability to pay its debts. Sweden cuts its economic forecast for the year, saying that the euro zone's problems were spreading its way.

The yield on the 10-year Treasury note fell to 1.96 percent. That means investors are plowing money into the government bonds, which they tend to do when they're nervous about the economy.

It's been a dismal two weeks for the stock market. Ever since the second quarter started, stocks have been yanked around by concerns that Europe's debt crisis is about to reignite and fears that the Federal Reserve will stop pumping so much money into the economy. Investors are wondering if the gains of the first quarter were just an aberration, without the economic fundamentals to support them.

The three major indexes are all still up for the year, but about a fifth of their gains have been wiped out in the past two weeks, the market's worst of the year. The losses come in volatile trading: In the nine trading days since the second quarter began, the Dow has fallen by triple digits on four days and risen by triple digits on one.